Select Committee on Transport, Local Government and the Regions Nineteenth Report



Continuing Management of the New Towns

  1. Between 1977 and 1992, all the New Town Development Corporations were wound up. The local authorities received most of the liabilities and the social housing. But the funds to maintain them were inadequate. The maintenance requirements are such that standard local authority funding streams are insufficient to maintain the housing. Some income generating assets transferred with the liabilities have now themselves become liabilities. The increase in the value from the sale of any of the liabilities for commercial purposes was clawed back by EP. Development sites went to the Commission for New Towns which was merged in 1999 with English Partnerships. Their main aim seemed to be to dispose of the outstanding sites rather than continue the work of the New Town Development Corporations. The income from land sales went to the Treasury, rather than being reinvested in the New Towns.
  2. Local Authorities

  3.  The local authorities were the main recipient of key public facilities built by the Development Corporations. This included public space, playing fields, roads and footpaths, sewers, community centres and much of the socially rented housing. Funding was to come from two sources;
  4. - Standard local authority income streams

    - Income generating 'balancing' assets which were transferred to the local council to cover the costs of maintaining the public facilities.

    In this section we consider how far these funding sources have proved sufficient.

    Local Authority funding streams

  5. The inadequacy of the funding arrangements was mentioned by many of the submissions by the local authorities. Telford & Wrekin council argued that the towns were built on the basis of continuing massive capital and revenue support. "The successors to the cash rich Development Corporations are cash-strapped local authorities." The submissions from the local authorities suggested that the Standard Spending Assessment (SSA) used to calculate the Rates Support Grant to local authorities did not cover the expensive 'non-standard' public facilities which the Development Corporations built. Halton Council pointed to the costs of maintaining the 24km bus way in Runcorn which is part of the 'unclassified' network. Because the actual vehicle flows are comparatively low, the Council receives only minimal funding through the SSA formula."[28] It also said that the footpaths that are adopted are not accounted for in the SSA formula. "Maintenance costs can be disproportionately high due to the difficulties of machine access away from the road."
  6. Many submissions mentioned the Government's review of the SSA formula but were sceptical that it would help them. They suggested that the main aim of the Government's review was to simplify the formula and that the outcome would not reflect their particular circumstances.
  7.  When the housing was transferred to the local authority, no provision was made to improve and renew it except through the rental income and standard housing funding sources. The submissions by the local authorities pointed out that the scale of renewal needed, especially taking into account the problem of innovative design, was more than could be funded through standard funding regimes. Milton Keynes council estimated that over the next 10 years it will require 139m for "wholesale structural and remedial works on non-traditionally built housing stock."[29]
  8. 'Balancing' Assets

  9. As the Development Corporations built facilities, such as community centres, public spaces and schools, they were transferred to the local authority as a community related asset. To cover the maintenance costs, the council was given an endowment in the form of an income-generating asset. These have usually been district shopping centres and development sites.
  10. The `balancing packages` were based in many cases on an over optimistic assumption about the durability of `assets` such as district and estate-based shopping centres. The income generating assets have all too often become liabilities; and many even need demolition or clearance. Halton Council listed the assets it received as a community centre, four aged shops in the town centre, two pub freeholds and two sports fields.[30]
  11. Treasury regulations require that if the community asset is developed for a commercially more beneficial use, English Partnerships should clawback a share of the increase in value. EP explained to us: "Clawback is a Treasury required mechanism whereby the monetary value of local amenities, provided from the public purse can be protected for the benefit of the public sector."[31] The percentage of the increase in value which is clawed back is reduced by two per cent every year. Clawback also applies to the housing and any land alongside it which is transferred to the local authority. Right-to-buy sales of council housing and developments by the private sector of social facilities including residential care homes or facilities for people with special needs are also included.[32]
  12. Many argue that the clawback arrangements are now acting as a disincentive to developing sites, many submissions argued. Telford & Wrekin Council pointed out that it sells up to 50 small areas of land each year "where with clawback at around 80 per cent, the Council spends more on administration than the net receipt left available."[33] It suggested that land is held back until clawback reduced further even where it is surplus to requirements.
  13. The Councils also receive very little if any income from the right-to-buy sales of rented housing transferred to them from the Development Corporations. Telford & Wrekin Council said that every right-to-buy disposal was actually costing it money. It highlighted an example when it received 678,000 from 106 right-to-buy disposals of ex Development Corporation stock but had to pay 887,000 to English Partnerships in clawback.
  14.  Welwyn Hatfield Council highlighted a large number of EP landholdings which included the subsoil on the roads and 'ransom' strips which were inhibiting development. According to Harlow council, there are also covenants over many sites it sold, which require that EP is consulted before the use is changed. This includes schools, health centres and some industrial estates. Harlow added that "EP have seemed reluctant to deal with schemes to vary covenants if they do not raise any substantial revenue, even though the local community could benefit."[34]
  15.  

  16. The Minister confirmed that sub-soil rights, ransom strips and covenants were being considered as part of stage 2 of the EP review.[35] This is welcome. The review should now identify ways to remove these impediments to local improvements.
  17. The Commission for New Towns/English Partnerships

  18. The remit given to the Commission for New Towns in 1961 was:
  19. - to facilitate the economic and social well-being of citizens and businesses in the English New Towns and

    - To achieve the best price reasonably obtainable for the land and property when sold.

  20. CNT had compulsory purchase order and planning powers on a similar basis to the New Town Development Corporations which preceded it. The remit and powers were transferred when CNT was merged with English Partnerships in 1999.[36] The Government is in the middle of a review into the future role of English Partnerships. The first stage of the review, published in March 2002, recommended that EP should:
  21. - relinquish the use of its planning powers in the former new town areas.[37]

    - transfer its non-strategic CNT landholdings to other appropriate bodies such as the local authorities.

    The second stage of the EP review, to be published in the autumn, is to identify these non-strategic sites which would then be transferred to other agencies.

  22. The management of the New Towns is affected by EP's continuing role as landowner with planning powers over those sites. Submissions to the Committee were concerned that;
  23. - the non-strategic sites should be transferred quickly to the local authorities,

    - too many strategic sites would not go to local authorities,

    - the strategic sites should go to the RDAs rather than remain with EP,

    - planning permissions issued by CNT and EP on all the undeveloped sites which it has not yet sold should be rescinded if they do not conform with the local authority's plans.

    Landownership

  24.  The 4.75bn loan made to the New Town Development Corporations by the Treasury was repaid in early 1999 from the sale of sites. Since then land sale receipts have generated about 600m of which about 120m has been invested in the New Towns.[38]
  25.   61. We received much evidence that CNT had given priority to maximising the commercial returns from its landholding rather than promoting the social and economic well-being of the New Town. John Walker, former chief executive of the Commission for New Towns, said that when the New Towns were wound up the Government was no longer "a promoter and guardian of the long term welfare of the towns and became a detached landlord with no apparent policy interest in long term success. It began to see them purely as a source of capital receipts." [39]

  26.  This view has not changed sufficiently since CNT was merged with EP. The New Town's Group said that: "EP operates as an asset manager, but not as a regeneration agency."[40] A few local authorities said that they had developed a constructive relationship with EP. Halton Council said that EP "had been a constant, active partner in numerous regeneration initiatives, including various adhoc programmes." In the last two years, it has also started developing partnerships in Northampton and Milton Keynes. Most however were critical of EP. Stevenage Borough Council commented: "EP tends only to invest in areas from which it derives income. This is despite the fact that the majority of the profit from sale of land in the towns has gone to the Treasury over the years."[41] Telford & Wrekin council suggested that EP operates on a narrow project basis, and does not take into account the strategic development needs of the areas.
  27. The land held by EP is of central importance to implementing many of the strategies put forward by the councils in the New Towns. In Telford, EP owns 300 hectares which has been set aside for housing and employment uses while the council only owns 11 hectares. In Warrington, Runcorn and Milton Keynes the balance is very similar. The New Towns Group also points out that EP owns land which could have been an important asset for the councils to borrow against.
  28. The first stage of the EP review did not set out a timetable for the transfer of sites. Submissions by local authorities following the first stage of the EP review suggested that the transfer of sites should be carried out as soon as possible. The New Towns Group of local authorities warned: "Failure to transfer sites within a short timescale will only increase the risk of fears of a 'fire' sale of EP's sites, with none of the benefits being accrued by local authorities."[42] It is also pressing that sufficient funds should be transferred with the sites to ensure that they do not become liabilities and can be developed to maximum benefit.
  29. Many of the submissions after the first stage of the review questioned how the second stage of the EP review would define strategic sites and were concerned that an excessively large number would be retained.
  30. EP told the Committee that it was likely to retain about 38 strategic sites following the results of the second stage of its review.[43] There does not seem to be clear a reason why the RDAs should not take on those sites. The DTLR's EP review pointed out that the RDAs took on EP's regional regeneration role when they were set up in 1999, with most of its land, which was not of national significance, also being transferred.[44] When EP appeared before us, it could not explain why it needed to exist alongside the RDAs in promoting regional regeneration. The submission by Halton council said that there was some confusion of roles between EP and the North West Development Agency. It said: "It could well be helpful to all those operating within the region for EP's New Town residuary role to be handled on a regional basis by the RDA. The broad development issues surrounding the future of the new town holdings would then be handled as part of the regional strategy and due observance to the requirements of sustainable development."[45]
  31. The use of land sale receipts

  32.  The use of the receipts from land sales is of particular concern to the local authorities, particularly since the Treasury loan has been repaid. The New Towns Group said that the towns "are being used as a cash cow and local authorities are expected to handle the liabilities they have inherited from the Government." It suggested that "finances from sales should be recycled into the regeneration of the most deprived wards in the area."[46] The New Towns Group considered that the next stage of the EP review must confirm that the receipts from the sale of the assets should be available for use by the local authority rather than being retained by the Treasury.
  33. The extent to which the land sale receipts could help to cover the liabilities inherited by the councils from the New Town Development Corporations is unclear. We asked all the local authorities how the cost of all the social, economic and physical liabilities which were a result of the New Town development compared to the remaining assets held by EP in the town. Most were unable to give an informed response. EP's assets are not necessarily in the New Towns where the income is most needed. Almost half of them are in Milton Keynes where 1,352 hectares of development land is held by EP, valued at 440m. The Council said that it requires 139m to bring development corporation housing up to standard over the next 10 years.[47] In the older New Towns very little land is owned, but there are considerable needs. The submission by Welwyn Hatfield Council suggested that the income from the sale of assets in the later New Towns should be reinvested in the first generation New Towns.[48]
  34. When the Housing and Planning Minister Tony McNulty appeared before us, he said that the second stage of the EP review would give an idea of the development needs of the New Towns. He also said that
  35. "hopefully within the context of the Stage 2 of the EP review and the wider context of looking at New Towns, the lessons will be learned.... I suspect there are harsh lessons to be learned almost on a new-town-by-new town basis The key now in terms of going forward is for EP and the development agencies and all the assorted partners to look at the New Towns and work out within their own localities how to take things forward to regenerate those areas."[49]

    Planning powers

  36. The planning powers still held by EP were a cause of concern for most local authorities. Under section 7 (1) of the New Towns Act 1981, planning permissions approved by New Town Development Corporations, CNT and EP have an indefinite life.[50] EP said that 1,544 hectares of the 4,538 hectares of New Town Land allocated for housing and employment uses had outstanding section 7 (1) planning permissions.[51] The majority is in Telford, Warrington and Milton Keynes.[52]
  37. Councils said that because CNT and subsequently EP had planning powers, they had lost the opportunity to negotiate planning obligations including affordable housing. They did not receive the application fees but were required to enforce the planning approvals. It is claimed that many of the outstanding permissions did not conform with current planning guidance. Telford & Wrekin council said that there was reluctance by EP to allocate sites for socially rented housing. The RTPI commented; "National and local planning policy has moved on considerably since these consents were first given, and it must be accepted that many of them are not in accordance with the tests set out in PPG3, 6 and 13."[53] Telford & Wrekin council estimated that it had lost about 1.5m in planning fees in relation to EP's land.
  38.  EP suggested in its submission to the Committee that a phased handover of its planning powers was required so that development was not delayed. It said: "Where sites are in the pipeline, there would be significant delay since the planning process would have to begin again from scratch, where development had not been authorised."[54] Telford & Wrekin council said that if the proposals were not contentious there should not be any delays if they are considered by local authorities. It said that delays would only happen if the proposals were contentious. "Those are the very proposals that ought to be subject to local intervention."[55]
  39.  The local authorities now running the New Towns are facing a major task with many areas requiring extensive renewal which they may not have the capacity to tackle. Some are not large enough to attract the skilled staff necessary and have little tradition of managing their own affairs including major regeneration projects. In the past the Commission for New Towns has taken on many important aspects of the New Towns. The Neighbourhood Renewal Unit could clearly have a role in advising them on the development of an urban management framework for the most problematic housing estates.
  40. The funds provided for the management and maintenance of the New Towns are inadequate, bearing in mind the non-traditional housing design and infrastructure and the extensive landscaping built by the Development Corporations which is more expensive to maintain and much now requires wholesale renewal.
  41. - The Standard Spending Assessment is unlikely to reflect the special conditions in the New Towns.

    - The 'balancing' packages provided for the New Towns are now not generating sufficient returns and need to be reviewed as some of the 'assets' have become liabilities.

    - The clawback requirement has meant that a lot of the income from right-to-buy sales is lost to the local authority and acts as a deterrent to the development of sites. The clawback requirement should be abolished so that the New Town local authorities are put on a similar basis to other local authorities.

  42. Since the Development Corporations were wound up, the sites have been sold off for maximum value rather than reflecting local needs, and the returns have gone directly to the Treasury. English Partnerships has not worked in partnership with many of the New Town local authorities to promote comprehensive regeneration, focussing almost exclusively on maximising its income through land sales.
  43.  

     

  44. The vast majority of outstanding sites owned by EP, which are not strategic, should be transferred immediately to the local authorities to enable them to implement their local development strategies and avoid a 'fire' sale.
  45. The definition of strategic sites should be very tightly drawn to give local authorities maximum control over their areas. Those sites which are of truly strategic importance should be passed on to the RDAs, leaving EP as a national agency which local authorities could bring in where they consider it appropriate to provide consultancy support.
  46. A comprehensive audit of the liabilities inherited by the local authorities from the Development Corporations is required so that adequate funds can be allocated for the maintenance of the towns. This audit should look at the social, economic and environmental impact, urban management impact and long term reinvestment needs of the New Towns. We welcome the commitment by the Minister that the second stage of the EP review could include an assessment of the needs of the New Towns.
  47. Local Authorities should keep the receipts from the sales of the non-strategic sites that are transferred to them. They should not be subject to clawback. The land sale receipts would help to meet the maintenance costs borne by the Local Authorities. However, the receipts would not meet the needs of all the New Towns. To meet the needs of individual towns, a New Towns Reinvestment Fund should be established which would recycle the receipts from the sale of strategic sites.
  48. The planning powers held by EP and the outstanding planning permissions on the sites are anomalous and do not help to promote mixed use, mixed tenure schemes on brownfield sites or in town centres.
  49. The outstanding planning permissions issued by the Development Corporations, CNT and EP on land which it still owns should be rescinded immediately where they do not conform with Local Authority plans.
  50. Future Growth

  51. There is huge potential for more development in the existing New Towns which the local authorities consider would make many of them more successful urban centres. The Government is also keen to develop more housing in the South East. As we have demonstrated in this report, the approach by EP, CNT and the New Town Development Corporations has major shortcomings. A partnership between the RDAs and the local councils would offer a more coherent approach providing both local and regional perspectives to any future development.
  52. We recommend that the Government promotes further expansion in the existing New Towns to help meet its housing targets, particularly where the New Towns have not achieved their critical mass. However the approach to the management of liabilities and the disposal of assets adopted by the New Town Corporations, EP and CNT is not appropriate for future development.
  53. Evaluation

  54. The Committee was astonished to receive evidence from both the DTLR and EP that the New Towns 'experiment' has never been evaluated and the reinvestment needs reviewed, despite the investment of 4.75bn in them. Given the evidence from our inquiry, it would be wrong at this stage to develop new generations of new towns, particularly before the experience of the existing 22 towns is evaluated.
  55. It is very surprising that the New Towns 'experiment' has never been evaluated. This evaluation should include more detailed reinvestment needs of the New Towns. An evaluation is urgently required which identifies both good practice and mistakes before any new major new settlements are considered.
  56. Conclusions and Recommendations

  57. Successive urban regeneration programmes have overlooked the needs of the New Towns By 1992, the new Towns had been de-designated by Central Government and were no longer recognised as a separate and identifiable policy area. This de-designation occurred prior to any audit of the regeneration needs of the towns being implemented. The focus on the regeneration of New Towns has, as a result been piecemeal with the level of regeneration investment being partly a function of the region within which they are situated. For example, Halton has been in receipt of Objective One resources since 1994 by virtue of its connection to the Merseyside conurbation. Similarly, an urban regeneration company in Corby has been supported by the RDA in the East Midlands because of the town's profile in a relatively affluent region. Skelmersdale in contrast, has fared less well in respect of regeneration policy as has South Telford, by virtue of their location adjacent to much larger areas of deprivation.
  58. The Public Policy Framework

  59. The public policy framework applied to the New Towns has been underpinned by the principle that the Treasury should receive a substantial benefit from any uplift in values on publicly owned land that was originally purchased or developed through Central Government subsidy. This policy has been implemented through English Partnerships which has between 1999 and 2001 invested 120 million in the New Towns and raised approximately 600 million in capital receipts. This continued process of asset and land disposal builds on a significant programme of property disposals between 1980 - 1999, which repaid all of the outstanding debt relating to the development of the Towns. The Government is therefore now accumulating a considerable capital windfall in respect of the New Towns, whilst reinvesting only 20 per cent of receipts in these localities.
  60. The key differences between the public policy framework for New Towns and other urban areas can be summarised under three headings; Planning, Finance and Regeneration.
  61. Planning

  62. Historically, a substantial amount of development land within the New Towns has been owned either by CNT or English Partnerships. Local Authorities have therefore, been unable to develop proactive local planning strategies supported by S106 planning agreements. Additionally, the planning consents relating to development sites have frequently been determined by the original New Towns or subsequent residuary bodies. This situation has militated against the development of a spatial development framework which is locally accountable, and has reduced fee income from the administration of the planning system to the local authority.
  63. Finance

  64. During the two decades from 1980, there was a significant reduction in real terms in Government capital investment in infrastructure. To balance this reduction in capital allocations, there has been an emphasis on local authorities setting up public and private sector partnerships to fund regeneration activity. However, in the New Towns this role was stymied by the pattern of land ownership and the fragmented planning system which applied in these local authorities.
  65. In addition any land, which had been developed by the New Town Development Corporation that was subsequently redeveloped, is subject to claw-back provisions at a rate which reduces by 2 per cent a year. This claw-back prevents the local authority in the New Towns exercising their enabling function and places them at a serious disadvantage compared to other local authorities with similar regeneration needs. A similar issue exists in respect of the income from Right-to-Buy housing sales where a proportion of the receipts are currently payable to English Partnerships to reflect Central Government's original investment in the construction of the property. This is an anomaly, as Council housing generally was constructed using Central Government subsidy and no other cohort of local authorities is required to return value to the Treasury in this way.
  66. Regeneration and Management

  67. The development of effective regeneration strategies has been hindered by the financial and planning issues highlighted above. However, these factors have been exacerbated by the increasing obsolescence of the infrastructure which requires direct intervention by the public sector to facilitate change.
  68. Fragmented ownership is a key feature of the original New Town housing estates which were often constructed using non-traditional methods on a Radburn layout. These estates were designed for single ownership and unified estate management, but fragmentation of ownership was caused by the asset disposals policies in the 1980s and early 1990s when properties were subject to substantial discounts and sold both to sitting tenants and through the open market. In many cases these estates are predominantly owned by marginal owner-occupiers and private landlords and because of high turnover and the estate design and layout, they are becoming increasingly difficult to manage.
  69. Urban management strategies are needed to address some of the issues which have arisen as a result of the previous asset disposals policies. These strategies need to reflect the higher costs of environmental maintenance and enforcement associated with semi privatised estates which were constructed initially for one managing agent. The Government should deploy the skills of the Neighbourhood Renewal Unit to assist and resource strategies to stabilise these areas and improve the quality of life for residents.
  70.  Decisions about the assets of the New Towns are being made in a strategic void. The New Towns have had successes and have generated a financial surplus for the Treasury. However, they have significant regeneration and reinvestment needs which are not being addressed by central Government. Without a significant policy change, the legacy of this altruistic 20th Century planning initiative may be transformed from a series of projects that have generated some social and economic benefits into expensive net liabilities. This failure of public policy to adapt to change may well create a text book example of how not to manage public assets.
  71. There needs to be a major change in the management of the assets and liabilities of New Towns and in particular the role of English Partnerships. The Government should:

- recognise the full extent of the physical liabilities facing the new towns, resulting directly from their former new town status

- implement the recommendations of Stage 1 of the EP review without delay - namely the transfer of non-strategic sites and planning powers to the local authorities;

- transfer strategic sites to the Regional Development Agencies;

- end the clawback arrangements.

    • establish a New Towns Reinvestment Fund to re-cycle the receipts from strategic land sales to be allocated on the basis of need.

 


28  
NT07 (b) Back

29   NT20(a) Back

30   NT07 (b) Back

31   NT25 (a) Back

32   EP says that clawback applies to approximately 2,000 ha of land or 1,848 sites Back

33   NT26(a) Back

34   NT05 Back

35   NT33 (d) Back

36   The legislation has not been amended and EP operates under two acts - the original legislation that set up CNT and the act which set EP up as an Urban Regeneration Agency.  Back

37   Quinquennial Review of English Partnerships, Outcome of Stage One. 2002 Back

38   NT33 Back

39   NT30 Back

40   NT14 Back

41   NT10 Back

42   NT14 (c) Back

43   Q17 Back

44   Quinquennial review of EP para 4.5 Back

45   NT07 Back

46   NT14 Back

47   There are discrepancies about the valuation of the sites - Milton Keynes council suggested that EP's sites were worth 900m, whilst EP valued them at 440m and Telford & Wrekin valued EP sites at about 270m and EP itself valued them at about 91m Back

48   NT23 Back

49   Q63 & 66 Back

50   Planning permissions approved by local authorities generally have a life of five years. Back

51   According to EP's submission to the Committee (NT25(a)) about 960 hectares of green field sites have permission for housing and employment uses Back

52   NT25 (a) Back

53   NT40 (i) Back

54   NT25 Back

55   NT26 (b) Back

 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 29 July 2002